Well, that’s a leading question. Have you been watching a bit too much Monty Python recently (nudge nudge)?
I thought that might grab your attention. I mean how low have you dared take your alcohol ABV levels following the complete change to the UK alcohol duty system since February 1. A move described by the then Chancellor, Rishi Sunak, when he introduced it as a new policy in the budget of 2021, as a “radical simplification” of the alcohol duty system.
A policy he went on to say was “simpler, fairer and healthier” and yet has been roundly condemned by anyone without an MP after their name. In reality the new duty system has been described as anything from “an assault” to “scandalous” to “WTF?”. Even the usually mild mannered and always politically astute Miles Beale, Chief Executive of the WSTA, has condemned the new alcohol policy as “a real kick in the teeth”, for wine and spirits in particular.
I can see it’s not very popular, but what has happened since the new duty system has been in place?
Well, it’s probably a little too early to determine the long-term implications, but it has forced everyone involved in buying, importing, distributing, selling and retailing of wine, beers and spirits to rip up their old drinks lists and re-calculate the price of duty on every single product they work with. For many that exercise has been underway for some time, and hundreds of thousands of pounds have been spent, if not millions, across the industry, updating computer and ordering systems capable of handling and calculating the new duty rates.
The whole operation will have to be done again when new vintages for wine from the 2025 harvests are released. Which makes this duty tax change particularly difficult for the wine industry to cope with, as producers are relying on the moon, sun and stars to determine what alcohol rate a wine is going to end up at. You can’t just work to a recipe like in beer and spirits.
But what do you mean by how low have you dared to go?
By effectively incentivising the drinks industry to produce lower alcohol products in order to get the lowest possible duty rate it has opened the door to drinks brands, producers, importers, retailers alike to introduce a whole raft of products that take the alcohol percentage down, down and down. Whilst the 0% category has firmly established itself as the low and no alcohol place to be in beers and spirits, thanks to the quality and consistency of the products being made, that is not the case in wine. It is just so much harder to take alcohol levels down and keep the same taste profiles and quality that consumers expect.
But that is not stopping people from trying?
Absolutely. The wine shelves in major retailers are slowly starting to change. Particularly at the ultra-competitive price points of £6-£9. The new duty rates simply make wines above 13% ABV increasingly hard to compete at those prices. If producers and importers can shave a few alcohol percentage points off their wines the hope is the always price-obsessed major retailers will list them.
You have still not answered the question. How low is low?
For some - as low as they can get away with. For others, and arguably where the majority of the wine industry is going, is working with producers to make wines that come in “naturally” at 10% to 11.5% ABV. Where they say they can pick grapes earlier and do clever things in the vineyard that keeps the wines true to their region and what they should taste like, whilst giving everyone down the supply chain the margin they are looking for. But it is a lot easier to make a quality 10-12% wine in parts of the northern hemisphere compared to hotter, drier countries like Australia, South Africa, Chile and Argentina. So there is potentially a lot of heavy lifting going on when the word “naturally" is being bandied about.
Okay, so what is going on below 10% ABV?
Now we finally get to the interesting bit. Not in terms of the actual wines being made, but what the big brands are now prepared to do in order to hit those all-important price points. There are now a raft of 6-9% wines that are either already in the market, or trying to convince a major retailer to stock them. Some even go as far as claiming they are exciting pieces of innovation. Rather ignoring the fact they would not be introduced to such an extent if Rishi had not thrown the whole duty system up in the air.
The jury is well and truly out on whether there is going to be a major market for these 8% and below wines. The pressure is also on those making wines at 10%-11% and if they can deliver the quality and consistency the wine market now expects.
Which brings us to the consumer. Yes, they have made it crystal clear they want more quality 0% alcoholic products. Including 0% wine. But have you ever heard a consumer ask for an 8% wine? Anecdotally retailers are having to take back bottles from customers unhappy with the quality of the wine they have been sold below 10% ABV.
The industry is potentially playing with fire. Consumption levels in wine are already down. People are either choosing to drink less, or they are switching to other alcoholic brands. Look at the beer category. It is having enormous success with beers at 0% and then with its super premium world lagers at 5%+ ABV. There is no market for 2%-3% ABV beers.
But parts of the wine industry are going out of their way to give consumers an arguably inferior product to what they are used to. It does not sound like an idea that would get very far in the Dragons’ Den.
* Find out how leading drinks figures have managed the changes in duty and what impact it is having on producers, importers and retailers in a special London Wine Fair debate chaired by Richard Siddle at 11.30am on May 20th on Centre Stage.
